Tuesday, February 19, 2008

STRUCTURED SETTLEMENT

Will any transaction in today’s business afford an equal opportunity to all parties to come up at once? No, every competitor in the race wants to be a winner. But, it is the structured settlement business that takes up to resolve conflicts and create win-win conclusion to costly disputes. Thus all parties gain his share of profit from structuring a long term settlement because a lump-sum amount is saved in circumvented court cost and other expenses bound to tax public coffers.

The target of Structured Settlement is to provide mutual benefits to the needy plaintiffs (injured victims). A network of independent brokers seeks to negotiate, with a range of structured settlement products that are marketed by life insurance companies with the casualty insurer. Funded by a life insurance product like a single premium immediate annuity, a structured settlement finances the needy plaintiffs or the injured parties. It is done in a way in such a way that the recipient is assured of having needy funds available to them for many years to come. Philip Corboy, Chairman, American Bar Association’s Special Committee on Medical Professional Liability once said “For years, structured settlements have offered great benefit and financial security to injury victims, surviving spouses and children involved in tort cases."

Structured settlement thus is a long-term financial package, an annuity or a contract that gives consent to a settlement to go for periodic payment. The installments continue for a specific period of time or for a lifetime and are paid annually, semi-annually or quarterly depending on the needs of the plaintiff. Varieties of circumstances lead a plaintiff (injured Victim) go for structured settlements are: -

1) Purchasing a house or vehicles2) To pay off mortgages3) To pay of a large amount of medical bills4) Debt elimination5) Education cost

These structures provide immediate payment for special damages to individuals and families suffering mainly from injury or accidents. The beneficiary of this structure is that it disperses money for legal claims and often a lump sum payment is made through the purchase of an annuity for a life insurance company.

How it works?

A contractual agreement is signed between the qualified settlement fund trustee and the insurer for periodic payment and future beneficial payment in addition to the immediate cash in exchange for a release and payment is done according to the deal. The Structure settlement industries ensures for the quickest possible transaction. The settlements are “Structured” to make relatively small settlement look bigger. William Robinson, Past President, Kentucky Bar Association said "The structured settlement has proven so effective at keeping seriously injured and disabled Americans off public assistance that [in 1997]; Congress amended the tax code to allow for increased use of structured settlements in workers compensation cases."

The different purchase options offered by the companies buying structured settlement according to the plaintiff’s financial need are:-

Only people having physical injuries are people with disabilities and the families of the injured are qualified for claiming funds for structured settlement. So this scheme is available to less than 1 % of the population. But an injured individual must purchase the structure just at the time of settlement otherwise it will be too late.

Why might I need a Structured Settlement?

People turn to a Structured Settlement companies mainly for investment and compensation. Thus a person receiving a good amount chooses a structured settlement company to convert their amount into a regular income. The structured settlement companies offer to assist the plaintiffs when they face a large compensation bill, by arranging a monthly payment that will cover the ongoing losses.

Which company offer Structured Settlement?

Amongst the many financial companies that offer Structured settlement, a reputed and established company should be approached that has the ability to provide the security and advice required to become risk-free. As it is designed to meet the need of the plaintiff, one should verify that the financial advisor possesses the required specialist knowledge and the company chosen has the necessary qualification and expertise

The obvious benefits of buying and selling Structured settlement plans

One significant benefit is that the payment stream provided in the structured settlement is tax-free for certain period of time if the set-up is appropriate. According to Alan Reich, President, National Organization on Disability, "Structured settlements serve the public good by ensuring that victims don't dissipate their settlements and wind up on public assistance." The entire settlement need not be sold. One can sell a portion of it, to raise cash for certain purpose like holidays, new car, educational expenses etc. Regular installments is made over an extended period of time and sometimes throughout the lifetime of the client and in case of the accidental death of the plaintiff the guaranteed portion of the settlement are passed over to the holders’ estate. Purchasing a structured settlement provides stability. It is popular for those who want to ensure that their retirement is well catered for by converting their lump-sum into regular ongoing monthly income.

ConclusionThe Structured settlement is similar to factoring that uses businesses to maintain their cash-flow. It is a tax-free and legal business. The insurance companies give highest commission but one must keep an eye on the fact that it is not eating up the main principle. According to William Garmer, Board of Governors, Association of Trial Lawyers of America "Structured settlements are a benefit that I and thousands of plaintiff attorneys have recommended to clients as one of the best ways to guarantee financial security and independence." Companies should boost the cash flow and give the best out of the investment made. Otherwise the settlement package will go into bankruptcy and defaults.